Welcome to “The most powerful companies you’ve never heard of” – an ongoing series from The Conversation that sheds light on big companies with low profiles. Today, The University of Queensland’s Clive Phillips examines global agricultural firm Cargill and its place in the looming global food crisis.
Cargill Inc was established almost 150 years ago when a young American, William W Cargill, bought a grain store in Iowa.
The company has since expanded to include a wide range of food enterprises, including meat processing, commodity trading and fertiliser production.
Its business prospers most in times of food shortage, such as the world wars of the 20th century, and more recently, with the diversion of grain to produce biofuels and the need to feed an expanding world population.
Cargill’s global revenue from sales was $US120 billion in the current fiscal year, up 18% from 2010, with earnings of $US2.7 billion.
The company is still 90% family-owned and employs 130,000 people worldwide. With undisclosed personal fortunes estimated in the billions, the Cargill family is one of the richest in the world.
In Australia, the merger this year with beef processing giant Teys Bros provides the expanded Cargill Australia division with the opportunity to manage the entire beef cattle food chain, from the production of stock feed to processing the carcases of 1.5 million beef cattle per year.
Future food crisis
To really measure the potential power of this company, and indeed the industry it operates in, we should look forward to the year 2050.
The world population will have expanded to 9 billion, which means that food production must increase by 70% from today’s levels.
This is only a part of the looming problem. Most of the population expansion will occur in developing countries, particularly in sub-Saharan Africa. There will be expanding food requirements, but without the increasing wealth that characterises Asia’s newly developed countries, like India and China. As these newly developed countries become more affluent, they are embracing our Western diet as avidly as Western music and television.
This means that the big multinational agricultural corporations will have a ready overseas market for intensively produced beef.
The north of Australia, with its plentiful water supply and warm climate could be used more intensively to create vast fields of lush grazing for breeding cattle.
Young cattle would then be brought down en masse to the feedlots in central east and west Australia to be fattened on grain produced in the southern states, before being processed and sent overseas as vacuum-packed beef.
There are currently about a billion chronically undernourished people in the world. Even if world food production does expand by 70%, it is still estimated that 5% of the population will be affected in 2050.
In parts of sub-Saharan Africa, it could be 15% of the population. They will not be able to afford the luxury of meat, or even the cereals that are used to feed cattle.
Throughout history, widespread inequity in food supply has led to peasant revolts, which eventually put the power back in the hands of the people.
But in the past, food production was largely internalised within a country and wealth redistribution was an achievable target for the masses.
Now that food production is globalised and international travel is easy, people are increasingly turning to an easier alternative – economic migration. Europe and the US are experiencing pressure on their southern borders as never before.
There are several possible solutions to this food inequity problem. All require action that might seem difficult now, but with proper planning could be effected over the next 40 years.
Further agricultural research and development to increase output would be the easiest option, but all the signs suggest that the rate of growth in output is declining.
Even where the research is successful, it may bring unwanted side effects in terms of damage to the environment and animal welfare.
For example, intensification through the use of highly muscled beef cattle could cause welfare problems for pure-bred animals, which will be less fit. The development of more intensive animal production systems will do little to help the chronically undernourished in rural Africa.
Another potential solution would be changing the type of food production systems we operate.
As long as they use land that could be used for production of other types of human food, beef cattle are generally acknowledged to be among the least efficient agricultural converters of resources into food. Experts argue about the exact scale of the increase in energy and water use and emissions output, compared to food production from plants.
Conversion of some of north Australia’s fertile land into to production of salad and vegetable crops has already started – for instance in the Ord River scheme – and could be expanded in similar tropical regions with the necessary infrastructural investment.
This will increase food production potential, which if adopted worldwide, could have a significant impact on food availability.
Role for Cargill?
How will big multinational agricultural companies like Cargill serve a disaffected developing world population when the food crisis escalates?
They offer the advantage over small farming systems in the degree of control that they have over their enterprises. During drought, for example, cattle can be moved from one property to another with more fodder available.
However, they answer primarily to their shareholders, who may not want to see their investment risked in novel ventures to alleviate poverty.
Will the multinational companies invest in the infrastructure and technologies necessary to feed the world’s poor when their first-world consumers are feeding the voracious demands of their shareholders for profits?
Former Cargill CEO Warren Staley gave an indication of his company’s priorities when he said in 2002, “cash is king”.
Another solution would be for developed nations to collaborate more intensively with those still developing to look after the food supply.
This could be on a latitudinal basis, with the US and Canada working with countries in South and Latin America, and European nations with Africa, giving Australia and New Zealand a major role in the Asia/Pacific regions. The UN’s Food and Agriculture Organisation could offer guidance and limited support, but is nowhere powerful enough to take on this significant challenge alone.
To rise to this challenge, governments must have a greater control over the ever expanding multinational companies like Cargill. It is no accident that the Cargill empire emerged in the “land of the free”.
Will there be a new world order of major multinational companies governing all aspects of our food production systems?
Nowhere is the recent emergence of major industrial enterprise more evident than in our food production.
Witness the development of the broiler chicken industries in Brazil and Thailand over the last 20 years. These industries are not demonstrating any altruistic concerns for food ethics, indeed they could be accused of engaging in brinkmanship to minimise their commitment to the environment and animal welfare.
Closer to home we have only just witnessed how widespread calls to end the live export of animals to be slaughtered overseas are easily ignored by the Australian Government when the financial implications to the industry become evident.
Multinational companies bring the promise of profits, growth and secure food for the developed world, gaining them government support.
But are there human, animal and environmental costs to be paid?
In these challenging times we need strong governments that are able to control the multinational companies and are prepared to take the hard decisions to invest in the future of global food supplies and hence the peace and security of our entire region.
Is there a big company with a low profile that you think more people should know about? If so, email the editor.